ABC Company is considering the purchase of a new set of machine tools to process special orders over the next three years. The following financial information is available:

• Without the project, the company expects to have a taxable income of $400,000 each year from its regular business over the next three years.
• This threeyear project requires the purchase of a new set of machine tools at a cost of $50,000 (a portion of it was a loan = $25,000 with a 10% interest rate). The equipment falls into the MACRS threeyear class. The tools will be sold at the end of the project life (at the end of the third year) for $10,000 (assume that the gain tax rate is 25%). The project will bring in additional annual revenue of $90,000, but it is expected to incur additional annual operating costs of $25,000.

a) Generate the net cash flow (after-tax) for the new machine. b) Compute the NPW at MARR = 15%. Is this investment acceptable? (Show the detailed and organized solution to get the full credit.)

Year	0	1	2	3
Income Statement
Revenue
Expenses
Taxable Income
Income Taxes
Net Income
Cash Flow Statement
Year	0	1	2	3
Operating Activities
Investment Activities
Financing Activities
Net Cash Flow

Present Worth =

Is the project acceptable (Yes/No):